What is Local Body Tax?

Here's a quick lowdown on all you needed to know about Local Body Tax that has led to widespread protests by traders and manufacturers in Mumbai.

What is Local Body Tax?

Local Body Tax (LBT), to be imposed in Maharashtra October onwards, will be valid on the sale or consumption of certain products.

It was proposed in the state budget as a replacement for Octroi, as per the Government directives to the BMC, where businessmen would declare their income and tax would be paid on that.

How is it different from octroi?

LBT gives direct access of accounts and turnovers of merchants. Earlier, octroi was charged on the material that came into the city, but LBT will be charged on overall turnover of merchants.

Trader has to pay the tax once every 40 days using online portals, cheque, demand draft or cash through a designated bank or counters of the civic bodies.

According to traders, the tax will be an addition to the existing Value Added Tax (VAT).

Revenue system

The current cash flow of the administration will change in this system, as they will get the revenue every month-end and not on an annual basis.

Traders claim that if they have to pay more taxes, they will finally levy it on the buyers, as the end product will cost them more. The tax varies from 0-7 per cent, depending on the goods.

Anti-LBT

Retailers, wholesalers and manufacturers are against LBT which they feel will lead to more corruption. They also said that government's tax regime keeps changing every year, in turn inconveniencing them.